Wolfgang Breymann - Academia.edu (original) (raw)

Papers by Wolfgang Breymann

Nature, 1996

The availability of high-frequency data for nancial markets has made it possible to study market ... more The availability of high-frequency data for nancial markets has made it possible to study market dynamics on timescales of less than a day 1 ]. F or foreign exchange (FX) rates M uller et al. 2] have s h o wn that there is a net information ow from long to short time scales: the behaviour of long-term traders (who watch the market only from time to time) in uences the behaviour of short-term traders (who watch the market continuously). Motivated by this hierarchical feature, we h a ve studied FX market dynamics in more detail, and report here an analogy between FX market dynamics and hydrodynamic turbulence 3{8]. Speci cally, the relationship between the probability density o f FX price changes (x) and the time delay (t) (Fig. 1a) is much the same as the relationship between the probability density o f t h e v elocity di erences (v) o f t wo points in a turbulent o w and their spatial distance r (Fig. 1b). Guided by this similarity w e claim that there is an information cascade in FX market dynamics that corresponds to the energy cascade in hydrodynamic turbulence. On the basis of this analogy we c a n n o w rationalize the statistics of FX price di erences at di erent time delays, which is important for, for example, option pricing. The analogy also provides a conceptual framework for understanding the short-term dynamics of speculative markets.

Journal of Statistical Physics, 1994

In hyperbolic systems, transient chaos is associated with an underlying chaotic saddle in phase s... more In hyperbolic systems, transient chaos is associated with an underlying chaotic saddle in phase space. The structure of the chaotic saddle of a class of piecewise linear, area-preserving, two-dimensional maps with overall constant Lyapunov exponents has been observed by a scattering method. The free energy obtained in this way displays a “phase transition” at β<0 in spite of the fact that no phase transition occurs in the free energy dedcued from the spectrum of Lyapunov exponents. This is possible because pruning introduces a second effective scaling exponent by creating, at each level of the approximation, particular small pieces in the incomplete Cantor set approximating the saddle. The second scaling arises for a subset of values of the control parameter that is dense in the parameter interval.

International Journal of Theoretical and Applied Finance, 2000

A time series model for the FX dynamics is presented which takes into account structural peculiar... more A time series model for the FX dynamics is presented which takes into account structural peculiarities of the market, namely its heterogeneity and an information flow from long to short time horizons. The model emerges from an analogy between FX dynamics and hydrodynamic turbulence. The heterogeneity of the market is modeled in the form of a multiplicative cascade of time scales ranging from several minutes to a few months, analogous to the Kolmogorov cascade in turbulence. The model reproduces well the important empirical characteristics of FX rates for major currencies, as the heavy-tailed distribution of returns, their change in shape with the increasing time interval, and the persistence of volatility.

Parallel Sessions D: Reaching for Sense in Large Bodies of Data

In lifecycle management of technical systems typically different criteria are applied for valuati... more In lifecycle management of technical systems typically different criteria are applied for valuating and optimizing financial and technical command variables. There is a divide between upper management and maintenance management which results in suboptimal decisions and inefficient use of operational resources. Overcoming these limitations will raise lifecycle management to a qualitatively new level. Our aim is to bridge this divide by means of an integrated valuation method that takes into account the costs and benefits of the whole life cycle of a technical system and is accepted by both the upper management and the maintenance management. The UFA methodology extended for non-financial companies provides a suitable framework for this endeavour. Initially, the UFA framework was developed for the banking sector. The central part of the non-financial extension consists of a company meta model specifying the main steps of production (investment, running production, and sales of goods) and linking them to the balance sheet and P&L reporting. Maintenance costs and benefits can be included following this line. From a conceptual point of view, this approach is different from the real option approach proposed in ref., where a production unit (a plant) is described as an option that gives the owner the right but not the obligation to produce certain goods by operating the plant. Two case studies are presented in the light of the extended UFA methodology. The first study deals with the valuation of a service level agreement based on lifetime probabilities while the second one presents an optimized replacement strategy for middle-voltage to low-voltage transformer stations with a cost reduction of up to 70%

2018 IEEE/ACM 5th International Conference on Big Data Computing Applications and Technologies (BDCAT), 2018

Real-time financial risk analytics is very challenging due to heterogeneous data sets within and ... more Real-time financial risk analytics is very challenging due to heterogeneous data sets within and across banks worldwide and highly volatile financial markets. Moreover, large financial organizations have hundreds of millions of financial contracts on their balance sheets. Since there is no standard for modelling financial data, current financial risk algorithms are typically inconsistent and non-scalable. In this paper, we present a novel implementation of a real-world use case for performing largescale financial risk analytics leveraging Big Data technology. Our performance evaluation demonstrates almost linear scalability.

Communications on Stochastic Analysis, Dec 1, 2011

This paper proposes an approach to the intraday analysis of the dynamics of electricity prices. T... more This paper proposes an approach to the intraday analysis of the dynamics of electricity prices. The growth optimal portfolio (GOP) is used as a reference unit in a continuous financial electricity price model. A diversified global portfolio in the form a market capitalisation weighted index approximates the GOP. The GOP, measured in units of electricity, is normalised and then modelled as a time transformed square root process of dimension four. The dynamics of the resulting process is empirically verified. Intraday spot electricity prices from the US and Australian markets are used for this analysis. The empirical findings identify a simple but realistic model for examining the volatile behaviour of electricity prices. The proposed model reflects the historical price evolution reasonably well by using only a few robust and readily observable parameters. The evolution of the transformed time is modelled via a rapidly evolving market activity. A periodic, ergodic process with deterministic volatility is used to model market activity.

The Journal of Risk Finance, 2018

The purpose of this study is to propose a bearer service, which generates and maintains a “digita... more The purpose of this study is to propose a bearer service, which generates and maintains a “digital doppelganger” for every financial contract in the form of a dynamic transaction document that is a standardised “data facility” automatically making important contract data from the transaction counterparties available to relevant authorities mandated by law to request and process such data. This would be achieved by sharing certain elements of the dynamic transaction document on a bearer service, based on a federation of distribution ledgers; such a quasi-simultaneous sharing of risk data becomes possible because the dynamic transaction document maintain a record of state in semi-real time, and this state can be verified by anybody with access to the distribution ledgers, also in semi-real time.,In this paper, the authors propose a novel, regular technology (RegTech) cum automated legal text approach for financial transaction as well as financial risk reporting that is based on cutting-edge distributed computing and decentralised data management technologies such as distributed ledger (Swanson, 2015), distributed storage (Arner et al., 2016; Chandra et al., 2013; Caron et al., 2014), algorithmic financial contract standards (Brammertz and Mendelowitz, 2014; Breymann and Mendelowitz, 2015; Braswell, 2016), automated legal text (Hazard and Haapio, 2017) and document engineering methods and techniques (Glushko and McGrath, 2005). This approach is equally inspired by the concept of the “bearer service” and its capacity to span over existing and future technological systems and substrates (Kavassalis et al., 2000; Clark, 1988).,The result is a transformation of supervisors’ capacity to monitor risk in the financial system based on data which preserve informational content of financial instruments at the most granular level, in combination with a mathematically robust time stamping approach using blockchain technology.,The RegTech approach has the potential to contain operational risk linked to inadequate handling of risk data and to rein in compliance cost of supervisory reporting.,The present RegTech approach to financial risk monitoring and supervisory reporting is the first integration of algorithmic financial data standards with blockchain functionality.

physica status solidi (b), 1998

Http Www Theses Fr, 1987

Etude theorique des phases plastiques des cristaux moleculaires. La premiere partie se propose d&... more Etude theorique des phases plastiques des cristaux moleculaires. La premiere partie se propose d'expliquer le profil spectral raman de certains modes de vibrations internes en utilisant la technique des fonctions rotateurs symetriques pour exprimer d'une facon generale, l'interaction vibrationnelle entre modes appartenant a diverses molecules. Les resultats sont ensuite appliques aux modes internes detectables par diffusion raman et qui sont, simultanement, fortement actifs en absorption ir. La seconde partie contient une simulation par dynamique moleculaire d'un modele realiste d'un cristal de neopentane dans sa phase plastique

In this document the generalized hyperbolic (GH) distribution is explained to the extent which is... more In this document the generalized hyperbolic (GH) distribution is explained to the extent which is required to understand the internals of the R package ghyp. Essentially, the density and moment generating functions of the GH distribution and its special cases are provided together with some important properties of the GH family. In addition the algorithm underlying the fitting procedure for the multivariate GH distribution is explained. Then we shed light on how to switch between different parametrizations of the GH distribution. In the appendix we describe the generalized inverse Gaussian distribution and give some useful facts regarding the modified Bessel function of the third kind. Finally, we write on the design on the package ghyp and give some code chunks which indicate how the software can be used.

List of Figures. List of Tables. Acknowledgments. Preface. PART I: INTRODUCTION. 1. The Evolution... more List of Figures. List of Tables. Acknowledgments. Preface. PART I: INTRODUCTION. 1. The Evolution of Financial Analysis. 1.1 Bookkeeping. 1.2 Modern finance. 1.3 Departments, silos and analysis. 1.4 The IT system landscape. 1.5 New approach. 1.6 Hazards of a single solution. 2. Finding the Elements. 2.1 The notion of elements. 2.2 Elements of financial analysis. 2.3 Input elements. 2.4 Financial events and expected cash flows. 2.5 Risk factors and risk categories. 2.6 The time dimension. 2.7 Classification of analysis. 2.8 Nonfinancial cash flows. 2.9 The methodology as an image. PART II: INPUT ELEMENTS. 3. Financial Contracts. 3.1 Modeling of financial contracts. 3.2 Standard contract types. 3.3 Rules and mechanisms of standard contracts. 3.4 Examples. 3.5 Nonstandard contract types. Appendix: Practical considerations. 3.A.1 Mapping process. 3.A.2 Data quality. 4. Market Risk Factors. 4.1 Expectations. 4.2 Static modelling. 4.3 Stochastic market models: the arbitrage-free world. 4.4 Stochastic market models: the real world. 4.5 Alternative valuation techniques. Further reading. 5. Counterparty. 5.1 Exposure, rating and probabilities of default. 5.2 Data determining gross exposure. 5.3 Credit enhancements. 5.4 Credit line and limits. 5.5 Credit ratings. Further reading 134. 6. Behavior. 6.1 Risk sources and behavior. 6.2 Market-related behavior. 6.3 Insurance-related behavior. 6.4 Credit risk-related behavior. 6.5 Sequence of behavioral effects. Further reading. 7. Costs. 7.1 Introduction to cost accounting. 7.2 Allocating costs to financial contracts. 7.3 Integration of costs into the general framework. 7.4 Summary and conclusions. Further reading. PART III: ANALYSIS - LIQUIDATION VIEW. 8. Financial Events and Liquidity . 8.1 Financial event processing. 8.2 Examples. 8.3 Behavioral events. 8.4 Liquidity reports. Further reading. 9. Value, Income and FTP. 9.1 Valuation principles. 9.2 The big four. 9.3 Other valuation principles. 9.4 Special cases. 9.5 IFRS 32, 39. 9.6 Funds transfer pricing. Further reading. 10. Sensitivity. 10.1 Challenges of sensitivity calculation. 10.2 Interest rate sensitivities from events. 10.3 Other market sensitivities. 10.4 Behavioral sensitivities. 10.5 Sensitivity reports. 11. Risk. 11.1 Risk and VaR. 11.2 Analytical VaR methods. 11.3 Numerical VaR methods. 11.4 Expected shortfall. 11.5 Stress and shock scenarios. 11.6 Regulatory risk measures. 11.7 Backtesting. Appendix: Historization. 11.A.1 Granularity. 11.A.2 Data reduction. 11.A.3 Intraday and parallel histories. Further reading. 12. Operational Risk. 12.1 Basic indicator and standardized approach. 12.2 Statistical basis of the advanced measurement approach. 12.3 Operational value at risk. Further reading. PART IV: ANALYSIS - GOING-CONCERN VIEW. 13. General Mechanisms. 13.1 Market conditions and general risk factors. 13.2 New financial production. 13.3 Behavior and counterparty. 13.4 Cost. 13.5 Balancing. Appendix: Aggregation. 13.A.1 Single contract level and performance. 13.A.2 Contract aggregation. 14. Banks. 14.1 Chart of accounts and portfolio structures. 14.2 Forecasting volume and characteristics. 14.3 Adding market forecast, counterparty information and behavior. 14.4 Analysis elements. 15. Life Insurance. 15.1 Chart of account. 15.2 The life contract. 15.3 Forecasting new production. 15.4 Analysis elements. 16. Non-life Insurance. 16.1 Chart of account. 16.2 The non-life contract. 16.3 The reinsurance contract. 16.4 Forecasting new volume and characteristics. 16.5 Analysis elements. 17. Nonfinancials. 17.1 Financial and nonfinancial corporates. 17.2 The nonfinancial model. 17.3 Analysis elements. 17.4 Corporate valuation. PART V: OUTLOOK AND CONCLUSIONS. 18. The Financial Laboratory. 18.1 Risk and performance measurements. 18.2 Example of an economic risk report. 18.3 Optimization. 18.4 Consistency. 19. Towards a Unified Financial Language. 19.1 The need for a unified financial language. 19.2 Structure of a unified financial language. 19.3 New finance, new regulation. Index.

Computers in Physics, 1996

Configuration space, phase space, Hilbert space. Where is the real world? Where are the laws of p... more Configuration space, phase space, Hilbert space. Where is the real world? Where are the laws of physics at work? Is chaos a question of the space just as "high treason is a question of the date" (Talleyrand)? Consider a double pendulum. The two-dimensional (2D) configuration space is a disk-shaped rink. The inner pendulum bob moves forward or backward on a circular path, regularly or irregularly in time, while the outer bob traces a complicated figure that may reach any point on the disk. In 4D phase space

Zeitschrift für Physik B Condensed Matter, 1996

A large number of energy levels in different invariant subspaces of the anisotropic XY-model are ... more A large number of energy levels in different invariant subspaces of the anisotropic XY-model are quasidegenerate in a wide parameter range, i.e., their spacing is much smaller than the mean level spacing of the system. These quasi-degeneracies can be interpreted in two ways: (i) as tunnel splitting, (ii) as weak level splitting related to a parametric point of exact degeneracy. Starting from the second interpretation we calculate the tunnel splitting by use of perturbative methods.

We study the rate of irreversible entropy production and the entropy flux generated by low-dimens... more We study the rate of irreversible entropy production and the entropy flux generated by low-dimensional dynamical systems modeling transport processes induced by the simultaneous presence of an external field and a density gradient. The key ingredient for understanding entropy balance is the coarse graining of the phasespace density. This mimics the fact that ever refining phase-space structures caused by chaotic dynamics can only be detected by finite resolution. Calculations are carried out for a generalized multibaker map. For the time-reversible dissipative ͑thermostated͒ version of the model, results of nonequilibrium thermodynamics are recovered in the large system limit. Independent of the choice of boundary conditions, we obtain the rate of irreversible entropy production per particle as u 2 /D, where u is the streaming velocity ͑current per density͒ and D is the diffusion coefficient. ͓S1063-651X͑98͒09407-0͔

The escape-rate formalism and the thermostating algorithm describe relaxation towards a decaying ... more The escape-rate formalism and the thermostating algorithm describe relaxation towards a decaying state with absorbing boundaries and a steady state of periodic systems, respectively. It has been shown that the key features of the transport properties of both approaches, if modeled by low-dimensional dynamical systems, can conveniently be described in the framework of multibaker maps. In the present paper we discuss in detail the steps required to reach a meaningful macroscopic limit. The limit involves a sequence of coarser and coarser descriptions (projections) until one reaches the level of irreversible macroscopic advection-diffusion equations. The influence of boundary conditions is studied in detail. Only a few of the chaos characteristics possess a meaningful macroscopic limit, but none of these is sufficient to determine the entropy production in a general non-equilibrium state.

A fully parametric, distribution-based method is presented that takes into account non-normality ... more A fully parametric, distribution-based method is presented that takes into account non-normality of short return series for quantitative risk assessment. The returns are modeled by the normal inverse Gaussian distribu- tion, which displays semi-heavy tails. By means of a cross-sectional approach, shape and skewness-parameters of the distribution are fitted for a whole family of FoHF that use the same investment style while scale and location parameters are fitted to each return series individually. All parameters are fitted together using a self-consistent approach based on an expectation-maximization type algorithm. This method makes it possible, for short return series, to work with a distribution that captures the stylized facts like skewness and fat tails and at the same time avoids overfitting. In this way, expected shortfall can be computed reliably for FoHF return series with about 50 observations.

Quantitative Finance, 2003

Stylised facts for univariate high-frequency data in finance are well-known. They include scaling... more Stylised facts for univariate high-frequency data in finance are well-known. They include scaling behaviour, volatility clustering, heavy tails, and seasonalities. The multivariate problem, however, has scarcely been addressed up to now. In this paper, bivariate series of high-frequency FX spot data for major FX markets are investigated. First, as an indispensable prerequisite for further analysis, the problem of simultaneous deseasonalisation of high-frequency data is addressed. In the bulk of the paper we analyse in detail the dependence structure as a function of the time scale. Particular emphasis is put on the tail behaviour, which is investigated by means of copulas and spectral measures.